Saturday, September 07, 2013

Rearranging the furniture, because there ain't no budget emergency

How the Coalition plans to dig a hole ...

Axing the carbon tax: Net cost $6 billion

Spending on new roads: Total $5.4 billion

Cut in the company tax rate: Total cost $4.9 billion

Axing the mining tax: Total cost $3.7billion

Paid parental leave scheme: Extra cost $3.3 billion

Direct action on climate change: Total cost $2 billion

Restoring FBT break for cars: Total cost $1.8 billion

Total*: $33.2 billion

*including smaller measures

and then fill it ...

Cutting the public service by 12,000 jobs: Saves $5.2 billion

Axing the Schoolkids Bonus: Saves $4.6 billion

Abandoning the foreign aid target: Saves $4.5 billion

Company tax levy to help pay for paid parental leave: Raises $4.4 billion

Axing business tax breaks funded by the mining tax: Saves $4.3 billion

Axing the low income super contribution: Saves $3.7 billion

Axing the Regional Infrastructure Fund: Saves $2.5 billion

Slowing superannuation increases: Saves $1.6 billion

Cutting the refugee intake: Saves $1.3 billion

Axing benefit supplements funded by mining tax: Saves $1.1 billion

Axing rail infrastructure projects: Saves $0.7 billion

Saving from "Stopping the boats": Estimated net $0.7 billion

Total*: $42 billion

*including smaller measures

Source: Coalition documents

(Labor has made few election commitments of any size during the campaign. Only one approaches $0.5 billion, a promise for better before and after school care. The Labor measures offset each other, having a zero effect on the pre-election budget balance.)

Rudd made the plea repeatedly in a blitzkrieg series of appearances late this week: “If you have any doubts, don’t vote for Abbott.”

As a pitch from an incumbent government seeking re-election, they don't come much more desperate.

Any doubts, any doubts at all?

It was the feeble, last-gasp denouement of a relentlessly negative campaign from Labor.

This, from a Prime Minister who promised the end of ''wall-to-wall negativity''.

''One thing I know for certain is that the old politics of the past just won't work for the future,'' he said in the first news conference of the campaign.

Staring at a likely heavy defeat on Saturday, Rudd may reflect that he should have taken his own advice.

After framing the election as a contest of new politics over old, and over who was best to manage the economy now that the ''boom is over'', Rudd has failed on both counts.

He dumped the positive politics within days, culminating in a blunt assertion that Abbott risked tipping the economy into recession. Tony Abbott has claimed the mantle as the superior custodian of the economy, despite Australia having one of the best performing economies in the world.

Abbott has steadily increased his ratings in the opinion polls throughout the five-week campaign on the issue voters rank the most important.

The final act in the economic debate of the campaign came this week, when the Coalition, finally, revealed its complete savings and costings.

Released on Thursday by Joe Hockey, sweating like Richard Nixon under the TV lights in a news conference so excruciating that Labor posted the video on its website, they proved a fitting finale to a debate dominated by deceit and lies.

For Labor, its claim of a $70 billion black hole was shown to be the wild exaggeration it had always been.

The Coalition's final budget numbers also highlighted what some may call brilliant political strategising, but that may rank as an even grander deceit.

Despite three years of decrying Labor mismanagement and a ''budget emergency'', the Coalition has adopted the same fiscal policy as Labor. It will achieve a surplus in the same year and its $6 billion worth of extra savings represent just 0.1 per cent of GDP...

Labor has been banging on about the Coalition's $70 billion black hole near hourly for 40 days. Early on, the Fairfax and Politifact fact-checking unit found the claim false. Then one of the nation's most respected economists, Saul Eslake, published a 34-page analysis concluding that the figure was $30 billion. Still Labor persisted, along the way claiming it had discovered a $10 billion miscalculation by the Coalition (which wasn't) and that the Coalition planned to cut health spending and cut the public service by 20,000 (which it doesn't).

The government acted as if mere repetition would get it over the line. As one of its staffers put it: ''We need to repeat it until we vomit.''

The Coalition could have reassured voters that it didn't plan big cuts by bringing out its final costings document some time before the final 42 hours of the campaign. But it enjoyed watching Labor jump at shadows. Its technique of letting journalists see its Parliamentary Budget Office costings (you can look and make notes before I whisk it out of your hands) meant Labor was suckered into making claims those reporting them knew to be wrong. It was fighting an opponent it couldn't see.

The Coalition was tricking Labor, but also deceiving the electorate. Deep down the Coalition did not believe there was a ''budget emergency''.

The costings showed the Coalition's measures will blow out the budget by $33.2 billion before reigning it in by cuts and savings totalling $42 billion. The net impact, $8.8 billion over four years, is so small as to be a rounding error. It amounts to 0.1 per cent of GDP.

In essence, the Coalition has no gripe with Labor's current budget stance. The measures it proposes axe some of the burdens on business but replaces them with others. It can afford to get rid of the mining tax by axing the measures it funded and funds a generous paid parental leave scheme by slashing Australia's projected foreign aid and refugee intake.

(The collapse in revenue of the mining and carbon taxes made the Opposition's job balancing the budget much easier.)

It is housekeeping of the kind we expect political parties to make, but it's inexcusable the Coalition waited until the very end to reveal its bottom line.

Several of the measures don't seem to add up. The saving attributed to removing the low income super rebate could only be achieved if it was effectively retrospective, that is by not paying out money due this year. The money booked from the 1.5 per cent levy on big businesses to fund the paid parental leave scheme appears to take no account of the lower company tax revenues likely as businesses claim it as a business expense.

''I found that after just five minutes examining the document,'' said Sydney University accounting expert Bob Walker. ''But without seeing what exactly they are costing, many of these things are not apparent. We are shown the totals and told three wise men have vouched for them, but not shown the detail of what it is they have vouched for.''

Hiring Geoff Carmody, the co-founder of Access Economics, Len Scanlan a former Queensland auditor-general, and Peter Shergold, a former head of the prime minister's department to ''review'' the costings seems like a political masterstroke. The Coalition released none of the detailed Parliamentary Budget Office costing documents that explained how the totals were arrived at, merely the totals themselves and a one-page letter from the chosen three saying they agreed with it.

Labor has had few policies to cost. Few of its announcements in the campaign are expensive. None approached $1 billion. Like most governments, it made its big announcements before the campaign.

And, as it happens, most have been adopted by the Coalition. They are no longer in contention. The National Disability Insurance Scheme, the four-year budgeted commitment to the Gonski education reforms, the four successive hikes in tobacco excise, the bank deposit levy to fund bailouts, the emptying of inactive super accounts, they are all now Coalition policy, despite what it may have said in the past.

Andrew Robb, the Coalition's finance spokesman, says the economy was always the Coalition's strength and Rudd defied orthodoxy by challenging it. ''Rudd is the guy who squandered the boom. That's the sentiment out there,'' he said. The former Liberal Party director who oversaw John Hewson's disastrous 1993 campaign says Rudd's has been the worst he has seen.

''It has been the most undisciplined and unprincipled campaign in my memory ? by a countrywide,'' he said. ''No narrative, except 'cut, cut, cut'.''

Robb is, of course, an adversary but there are plenty in Labor ranks who express even stronger denunciations in private, including some who backed Rudd back into the leadership.

''I mean you have a Noble Prize-winning economist who says we have the best economy in the world, that it's a miracle economy. Why aren't we telling that story?'' said one senior Labor figure.

The story is that real incomes have risen for Australians over the past six years, by more than $5000 per year for the average family. Interest rates are at record lows; unemployment and economic growth at impressive levels compared to other countries and the current account deficit well in hand.

Public debt is low as a percentage of GDP. Its rise was largely the result of the stimulus package during the global financial crisis and - says Joseph Stiglitz, the economist cited by the Labor figure - protected 200,000 jobs and probably saved the budget bottom line as well, given how it would have been ravaged by a recession.

''The obsession with public debt continues to be a distraction from the more fundamental question of how to establish long-term growth,'' Stiglitz wrote this week.

By attacking the Coalition's savings and budget management, Rudd played up to these overblown fears of debt and deficit. It was a continuation of the political missteps of the Gillard government, and its untenable vows to keep the budget in surplus.

And where Rudd did talk of the government's economic record during the campaign, it was more often about AAA credit ratings, not bread-and-butter issues, such as rising living standards.

Then there were the tactical howlers, including the verballing of the departments of Treasury and Finance last week over the alleged $10 billion hole in their costings and the public servants' extraordinary decision to release a public statement to clarify their position.

Add to that the $70 billion black hole that Labor knew did not bear scrutiny; the anti-GST scare; the on-the-fly policy of tax concessions for booming Northern Territory; the anti-foreign-investment rhetoric, and it made for a confusing campaign.

As the policies came thick and fast and from all directions, it seems to have left voters suspicious and unsure about what Labor stands for.

Abbott leads Rudd on who was best to ''handle the economy'' by 56 per cent to 36 per cent, according to the latest Nielsen survey. On trustworthiness, always the Opposition Leader's weak suit, Abbott leads by 44 per cent to 37 per cent, and the Prime Minister has slid 8 percentage points since July.

Rudd's communication has been as manic as his policy pronouncements: filled with jargon, delivered at rapid-fire speed and at great length.

Overall, Robb said it reinforced Rudd's reputation for chaotic management, the reason his colleagues tossed him out of power in 2010. ''Rudd and his team thought his popularity with the voters, his personality alone, would be enough to get them over the line,'' said the Labor figure. ''There was no plan once the election had been called.''

For Rudd and his colleagues, his erratic campaign must be sobering. It was his much vaunted campaigning skills and popularity that underpinned his return to the leadership.

Now, plenty are asking if his predecessor, Julia Gillard, would have done better.

But the problem with Labor's economic narrative goes back years. Former treasurer Wayne Swan was a poor communicator, and Gillard had little impact in countering the opposition's cost-of-living scare over the carbon tax.

Australians have never taken kindly to broken promises on taxation, as Paul Keating learnt in 1996, so Gillard provided her opponent with a potent weapon.

''An economic record is something you build up over years of consistent and methodical advocacy,'' said one Labor MP and Rudd supporter. ''We spent three years obsessing about our internal affairs. We were so preoccupied with tearing ourselves apart, we didn't build our brand ? You can never do it in a 33-day campaign.''

Most tellingly, in the past two elections, Labor has been led by recently installed leaders, unable to run on the government's record. Rudd's destabilisation of Julia Gillard hurt her government and made it difficult to sell her economic competence. He reaped what he sowed.

In the end, the ultimate source of Labor's inability to sell its economic credentials - and its likely electoral defeat on Saturday - is the party's indulgent in-fighting and defective political culture.

With Tom Allard, in The Sydney Morning Herald and The Age

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